Brenetta Smith thoughtlessly bought branded foods like Oreos and Doritos. But when she noticed Aldi’s grocery prices skyrocketing at her local supermarket, she realized she had to do something different.
So Smith, 40, a Memphis stay-at-home mom, started stocking up on dry goods like rice and flour, freezing meat on sale, and avoiding packaged foods. “We cut out all snacks,” she said.
She’s picked up new habits and realized that her approach has helped extend her husband’s salary as a cable technician, so she’s not going back to her old ways.
“Even if the world returns to normal, we can still maximize our salaries and earnings,” Smith said. She started posting budget tips on her TikTok in December. got followers.
Americans are facing massive inflation in grocery stores and restaurants. Overall food prices have risen 8.5% over the past year as consumers pay more for staples such as eggs, fruit and meat.
And companies that regained pricing power during the pandemic may be reluctant to let it go. In earnings reports over the past week, several large packaged food companies said they raised prices last quarter, boosting profits.
However, there are signs that consumers are starting to resist price increases. Some of the same multinationals that have raised food prices say sales volumes have fallen.
Such high prices risk alienating consumers, said Sucharita Kodari, a retail analyst at Forrester. “Customers may or may not come back,” she said. “At some point they will say enough is enough.”
For now, many large companies are raising prices and making enough profit to make up for the decline in sales volume. pepsicoManufactures products such as Quaker Oats and Cheetos.
NestleHot Pockets and Perrier water portfolio companies said on Tuesday that they increased their prices by 9.8% in the last quarter, but sales volume fell by 0.5%.
and on thursday UnileverThe consumer products giant derives about a third of its sales from food brands.
BMO Capital Markets retail analyst Simeon Siegel added that items such as milk and perishable groceries need to be restocked frequently.
But consumers may start redistributing their spending. “Those companies that can sustain price increases will see increased profits,” he added.
coca colaFor example, after raising prices last quarter, earnings jumped 12% to $3.1 billion.
Consumers generally continue to spend. The US economy grew at an annualized rate of 1.1% in the first quarter, the Commerce Department reported Thursday. This was the third consecutive quarter of growth after output declined in the first half of last year.
And food inflation is subsiding. According to the consumer price index, food prices in March were flat compared with the previous month, and food prices at home fell 0.3%. But restaurant prices continued to rise, with him up 0.6% since February.
Still, some customers are changing their buying habits. Kylie, 31, had her Parks purchase her three or four boxes of Pop Tarts Her Bites for her son on a trip to her local Safeway on Oahu, Hawaii. However, the price of her sweets has increased, so she often buys only one package at a time. She also buys juices less often, she says, and she skips trips to Costco because of the bulk of the merchandise.
I used to buy too much. Mr. Park, who works part-time as an esthetician, content creator“I don’t think I will go back.”
“What I buy is usually everything we eat,” she said.
Other consumers are choosing to buy cheaper generic products.When companies raise prices too much, consumers look for alternatives, Kodari said. “You basically introduced a lot of people who were your audience to your competitors,” she said. “What you end up seeing is a trade-off.”
Dianna Anderson’s attitude towards cereal brands used to be: But when inflation began to erode their breakfast budgets, Mx. Anderson, 37, who uses the pronouns they/them, began buying generic cereals at Target.
“I would probably stick with Target Brands,” says Mx. Anderson, a writer who works for a nonprofit in Minneapolis. “This is a decent product and even cheaper.”
Similarly, fast food restaurants are seeing higher profits as prices rise.
McDonald’s announced It announced this week that it had “strategic menu price increases” in the most recent quarter. Same-store sales increased his 12.6%, and profits rose 63% year over year to his $1.8 billion. However, the company admitted that some customers are cutting back.
“In light of the double-digit inflation we’ve been through, our system has done a good job of pricing,” McDonald’s CEO Christopher J. Kempczynski said on a conference call with analysts. I am really proud of that.
He added that the number of items per order has decreased slightly, with some customers choosing not to add fries. You see, you see more resistance than you first saw,” he said.
Mr. Park is also resisting. She used to go to her favorite fast food restaurant, McDonald’s, every week during her lunch break, but last summer, when she noticed that her prices had skyrocketed and her portions seemed low, she changed her monthly reduced.
“Filet au fish is my favourite,” Park said. “We feel like we are losing.”
and chipotle pepperhas been increasing prices for more than a year, with average menu prices up 10% year-over-year in the last quarter and profits up 84%. The company also expanded its profit margins and increased sales.
“I think we have proven that we have pricing power,” Chipotle Chief Executive Brian Nicholl said on a conference call with analysts this week. “We have a very strong brand and we don’t want to get ahead of the inflationary environment, but we also don’t want to lag behind.”
Not everyone is happy with Chipotle’s high cost.
Amy Scalf, 37, was shocked to learn that a burrito bowl with guacamole cost over $11 at Chipotle near her home in Lexington, Kentucky. on social mediashe said she might start going to Taco Bell instead.
“It’s definitely a deterrent,” she said of the price hike. “It’s an incentive to get cheaper options.”
